Multi-Level Marketing Scams

Here’s one of those opportunities that can be legit, but there are a lot of scam versions out there. And even the legitimate opportunities may be higher risk than you really want to deal with.

MLM stands for Multi-Level Marketing, although some treat it as Makes Lots of Money. The idea behind this is that you earn money not only on your sales, but on the sales of those you recruit, and that they recruit… on down to a certain level.

The first thing you need to know is that you cannot be paid just for recruiting members. This is a sign of a pyramid scheme, and such schemes collapse when there are no new members being recruited… assuming they don’t get shut down first. You don’t want to get caught in the legal tangle of an illegal pyramid being shut down! And if you’re one of the last recruited, you just lose your money.

There may be all kinds of payment structures on MLM, whether it is legitimate or a scam. You’ll hear about binary, matrix, all sorts of descriptions that can make it hard to tell exactly when it is that you get paid.

But don’t assume that just because there are products that you’re in the clear! Some pyramid schemes require distributors to buy products in order to continue their participation.

What about their income claims or claims made about their products? Do they seem reasonable? Remember, if you join an opportunity, you are responsible for any claims you make in your advertising, even if the materials were supplied to you by the company. Do your homework and know what is reasonable. Make sure all claims can be substantiated.

Some scams will use shills to tell you how wonderful the opportunity is. If you aren’t comfortable with the claims, listen to yourself and take more time.

Don’t sign up if you’re feeling pressured either! Take a few days, research the opportunity online, even talk to a lawyer if you feel the need, just make sure you know what you are getting yourself into.

Finally, remember that all businesses require you spend time as well as money in order to succeed. There is no such thing as a business that runs on autopilot. You have to do something to make it work.

I strongly recommend reading about MLM on the FTC’s website.

If You Get Scammed

First try to clear it up with the company. If they are uncooperative, let them know that you will be contacting officials about the matter. Then do it.

  • If you found out about the company on a website, let the site know so that they can take it off their site.
  • Contact the Attorney General in your state or the state the company is in.
  • Contact the BBB, both your local office and in the company’s state.
  • Contact the National Fraud Information Center if this was a “get rich quick” or “easy money” scheme.
  • Your local Consumer Protection Offices.
  • The Postmaster if you recieved the offer in the mail.
  • The Federal Trade Commission. Although the FTC does not handle individual complaints, they are on the lookout for patterns of deception and unfair practices. To register a complaint, write to: Correspondence Branch, Federal Trade Commission, Washington, DC 20580.